Some mental health problems of adolescence and adulthood, e.g. those associated with antisocial behaviors and deficient social skills, are likely to originate in childhood. This underscores the need for longitudinal research on early developmental course. Young monozygotic (MZ) and dizygotic (DZ) same-sex twins (200 pairs each) were used here to estimate genetic and environmental influences on early externalizing problems (aggressive, antisocial behavior) and internalizing problems (anxiety, depressed mood) that could result in long-term risk. This research is part of a larger longitudinal, multi-method investigation where children are assessed at multiple time points, from infancy to 7 years. This years report focuses on (a) the role of temperament in predicting problem behaviors in early childhood and (b) genetic and environmental factors implicated in both temperament and problem behaviors. Temperament was measured at 14, 20, 24, and 36 months, and problem behaviors at 4 years. Two temperament dimensions, negative emotionality and shyness, were examined in relation to externalizing and internalizing problems. MZ twins show greater concordance than DZ twins for both types of difficult temperament and problem behaviors, indicating genetic influence in each instance. Genetic influence on negative emotionality weakens with age, but becomes stronger over time for shyness. Genetic factors explain most of the associations between temperament and problem behavior. The two temperament types contribute to later problems in different ways: Negative emotionality predict both types of problems, whereas shyness predicts internalizing problems only. Difficult temperament contributes to emotional and behavioral problems, as seen in shared common genetic influence. Whether this leads to more severe psychological problems or psychiatric disorders, also will depend upon socialization experiences---as indicated by environmental effects found for early problem behaviors, but not for temperament.